Incentivise intellectual property: How to strike right balance

By: | Published: August 30, 2016 6:19 AM

The govt should set broad guidelines on principles that standard-setting bodies may keep in mind

patent examintaionIts Creative India: Innovative India signature line is expected to complement government’s ‘Start up India’ and ‘Make in India’ campaigns, and facilitate the ease of doing business.

In a move designed to incentivise intellectual property and its commercial exploitation, the government (DIPP) recently enunciated the National Intellectual Property Rights Policy (IPR Policy).

Its Creative India: Innovative India signature line is expected to complement government’s ‘Start up India’ and ‘Make in India’ campaigns, and facilitate the ease of doing business.

The IPR Policy incorporates various objectives such as: greater awareness of the value of intellectual property (IP), incentivise innovation and commercialisation of IPRs, strengthen and simplify the legal framework including speedy grant of patents, and stronger protection against infringement of IPRs.

At the same time, the IPR Policy emphasises the need for affordability of essential goods such as medicines. The DIPP has been designated as the sole nodal body for implementation of the IPR Policy and most kinds of IPRs are now transferred to its jurisdiction.

The IPR Policy recognises the growing role of advanced technology in economic growth. High-tech industries account for an increasing share of the GDP across nations.

Patents, copyrights and other forms of IPRs and the exclusivity that these confer on the right-holder seek to foster innovation and advanced technology and allow the originator to reap the profits. Yet, a balanced IPR regime must allow for remedies in case an IPR is abused.

The remedies are provided inter alia in legislations such as the Patents Act and the Competition Act.

A controversial issue of abuse surrounds abuse of patents that are determined and accepted to be essential to industry standards described as Standard Essential Patents (SEPs) following standards agreed by Standards Setting Organisations (SSOs).

When agreeing on industry standards, the SSOs also obtain undertakings that the SEPs will be offered by the patent-holder on Fair Reasonable and Non Discriminatory (FRAND) terms to all those who use the patented technology in their manufacturing processes. And here lies the germ of many a dispute.

Keeping in view the potential for increasing numbers of such disputes, the DIPP recently released a “Discussion Paper on Standard Essential Patents and their Availability on FRAND Terms” (Discussion Paper).

The comprehensive and well-researched Discussion Paper invited views and suggestions from stakeholders on a suitable policy framework to define the obligations of SEP holders and their licensees.

The SEP disputes in India have thrown up some complex issues for adjudication.

A case in point is the continuing stand-off between Ericsson and Indian mobile handset manufacturers, Micromax and Intex, whom Ericsson charged with infringement of its SEPs; when the issue could not be mutually resolved, it filed for injunction in the Delhi High Court.

The Court granted an injunction and also attempted mediation that failed. The manufacturers filed complaints in the Competition Commission of India (CCI) alleging abuse of dominance by Ericsson.

The High Court partially stayed the CCI proceedings on grounds of jurisdiction; unfortunately, the stay continued for several months till in a final order the Delhi Court cleared the jurisdiction of the CCI.

In its very well-reasoned final order, the High Court analysed the interplay between the Patents Act and the Competition Act, and held that the two provide materially different remedies that are not mutually exclusive and there is “no irreconcilable repugnancy or conflict” between the two laws.

It observed that “the proceedings under the Competition Act before the CCI are not in the nature of a private lis”. It went on also to observe that “there is good ground to hold that seeking injunctive reliefs by an SEP-holder in certain circumstance may amount to abuse of its dominant position”.

While the issue of the CCI’s jurisdiction has been eloquently resolved by the High Court order (hopefully, not to be challenged again), the problem of such instances of abuse of SEP power can be recurrent.

Here, the DIPP’s Discussion Paper serves admirably to focus on the issues that SSOs need to consider in their IPR policies so far as these relate to SEPs and FRAND terms and, consequently, to strike a reasonable balance between the legitimate rights of a SEP-holder and those of the users of the SEP in their production process.

But all SSOs may not be well versed in these complex issues, and there will always be the risk that different SSOs might end up with different solutions to the conflicting interests.

The government can provide a helping hand by issuing guidelines as has been done in some mature jurisdictions such as the US, European Union, Japan and Korea.

The guidelines are generally broad and leave it to stakeholders to mutually negotiate SEP-licensing terms. But they promote effective standard-setting and discourage abuses of SEPs.

For instance, the European Commission’s Guidelines regarding horizontal cooperation agreements, discuss the anti-competitive threat of patent ‘hold up’ in the SSO context and the importance of FRAND commitments in combating that threat.

The U.S. Department of Justice and Federal Trade Commission report on Antitrust Enforcement and Intellectual Property Rights discusses in detail patent ‘holdup’, including SEP disclosure policies, FRAND undertakings, and ex ante disclosure of licensing terms.

The Patent Policy of the well-known Institute of Electrical and Electronics Engineers provides a good model for an SSO IPR policy and includes many fundamental principles.

Issue of broad guidelines by DIPP setting out the general principles that SSOs may keep in mind in their SEP/FRAND policies could have enormous benefits such as: generating greater awareness amongst SSOs about the issues that arise in SEPs//FRAND; ensuring some uniformity in the approaches adopted by the different SSOs in India; increasing awareness amongst the courts when they are confronted with such issues; and restraining companies enjoying SEP power from abusing such power. This will help manufacturing in India, in particular SMEs.

The author is former head of the Competition Commission of India and is now in competition law practice

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